The owner of two sports memorabilia and gaming shops in the state of Washington who didn’t pay employment taxes on more than 50 of his workers over a nine-year period has been sentenced to 30 days in prison, ten months of home detention and restitution.
The U.S. Attorney’s Office is Seattle says Donald A. Knutsen, 54, the owner of Northwest Sportscards in Tacoma and University Place, withheld a total of $234,769 in income, Social Security and Medicare taxes from employee paychecks between 2008 and 2016. Prosecutors say he failed to accurately report and pay the tax withholdings and an additional $122,350 in employer-owned taxes to the Internal Revenue Service.
Knutsen pleaded guilty to the charges last April. He’ll be electronically monitored durng his home detention period after his month in prison and then spend three years on supervised release.
At sentencing Friday, U.S. District Judge Robert J. Bryan said, “Our whole government system is based upon citizens voluntarily completing their paperwork and paying taxes. Our system, the very foundation of our liberties, is dependent on citizens doing this civic duty.”
Knutsen also admitted he had failed to file any personal income tax returns after 2000.
“This defendant not only failed to pay his own taxes, he stole funds he was supposed to pay for Social Security and Medicare taxes for his employees,” said U.S. Attorney Annette L. Hayes. “Employees rely on their employers complying with the law and protecting their hard earned retirement benefits, not succumbing to naked greed. As a result of this prosecution, not only is the defendant spending time in prison, he is required to pay restitution so that his victims can be made whole.”
According to records filed in the case, Knutsen operated the two sports cards and memorabilia stores for more than 27 years. The investigation revealed that as early as 2002, he stopped paying employment taxes, including Social Security and Medicare taxes. Prosecutors say he withheld the money from his workers’ paychecks but never paid it to the IRS or filed the required forms accounting for the payments, instead using the money to acquire inventory and promote his business.
Because Knutsen was not filing tax forms or paying taxes to the IRS, the employees working at his shops did not accrue individual Social Security benefits during the relevant years. Under the terms of his plea agreement, Knutsen will work with the IRS to correct those past tax records.
Before his hearing last Friday, Knutsen delivered a check to the court for $82,500 as a partial payment for his $234,769 restitution obligation. In addition, after the IRS calculates his civil tax liability and interest, Knutsen will pay that amount as well.